Low-cost airlines flying to Malta, including Ryanair and Easyjet, will be complaining officially to the European Commission after Air Malta received state aid from the government to avoid bankruptcy.
The financial lifeline can hamper the development of fair competition to enable the growth and development of low fares allowing more people to travel by air, according to the Brussels-based European Low Fares Airline Association.
“We are following what is happening in Malta very closely and the association will be writing to the Commission to complain about this development with Air Malta,” association secretary general John Hanlon said yesterday.
According to the low cost-airlines, which Air Malta lists as one of the main reasons behind its financial woes, there are strict rules prohibiting state aid to ailing airlines. “It is important these rules are adhered to so as not to distort competition, to the detriment of consumers,” Mr Hanlon said.
Confronted by the fact that low-cost airlines flying to Malta were also receiving handsome subsidies from Maltese coffers, Mr Hanlon steered clear of entering into the issue. He would only say: “The association has no knowledge of any illegal state aid, which it is alleged has been extended to low-cost airlines by the government of Malta.”
Earlier this week, the Commission authorised a loan facility of €52 million to keep Air Malta’s planes flying over the next six months until a robust restructuring programme is put in place. The decision opened the way for the national carrier to receive more government aid in the future once the restructuring programme is agreed with the Commission and put in place.
The EU’s procedures allow third parties to make their comments and objections to granting state aid before the Commission makes the final decision. The association is taking the opportunity to post its formal objections directly to European Competition Commissioner Joaquin Almunia.
Back in 2006, Malta had sought, and obtained, permission from the EU to initiate an air route development scheme so it could provide start-up aid to airlines that opened new or underserved routes to Malta International Airport. The scheme, which mainly benefitted low-cost airlines such as Ryanair and Easyjet, will last until September at a cost of €58.2 million to Maltese taxpayers.
Its introduction, opposed by Air Malta, brought immediate benefits to the island’s tourism industry with many new routes opened and hundreds of thousands of tourists flying in. Maltese passengers also started relishing rock-bottom air fares to travel abroad.
However, this development affected Air Malta business badly. Due to its recurrent high costs, the national airline could not compete with the leaner low-cost airlines, even though the government protected some of the most commercially viable routes.
The European Low Fares Airline Association has 10 members: Blue Air, Easyjet, Flybe, Jet2.com, Norwegian Air Shuttle, Ryanair, Sverige Flyg, Transavia.com, Vueling and Wizz Air.